The REIT sector has taken a beating this year as the combination of high inflation and surging interest rates dampens sentiment towards this asset class.
The iEdge S-REIT Leaders Index has fallen 10.8% in the last 12 months to near its lowest point in the last five years.
Investors are worried that REITs will report lower distributions because of these headwinds.
However, there is a small bunch of REITs that have bucked the trend.
These REITs reported their latest business updates that hint at potentially higher distributions in their next quarter.
We profile four of these REITs that you may wish to include in your buy watchlist.
ESR-Logos REIT (SGX: J91U)
ESR-Logos REIT, or ESRLR, is an industrial REIT with a portfolio of 81 properties located in Singapore, Australia, and Japan.
The REIT’s total assets under management (AUM) stood at S$5.5 billion as of 30 June 2023.
For the third quarter of 2023 (3Q 2023), gross revenue jumped 19.2% year on year to S$290.7 million.
Net property income (NPI) climbed 19.4% year on year to S$206.1 million.
ESRLR’s portfolio enjoyed a positive rental reversion of 13.5% for the quarter and 12% for the first nine months of 2023 (9M 2023).
The REIT also reported a high occupancy rate of 90.3%.
ESRLR’s gearing stood at 37.7% and is expected to reduce to 35.3% if its recent divestments were used to pay down debt.
The REIT also has low refinancing risk as it had refinanced all its 2023 debt with only 11.9% of total loans coming due in 2024.
In a separate update, the manager announced that its maiden Japan acquisition, ESR Sakura Distribution Centre, has achieved full occupancy with the expansion of space requirements.
Elsewhere, the manager also secured a new tenant for its newly completed 7002 Ang Mo Kio Avenue 5, raising the occupancy rate of the property to 62%.
CDL Hospitality Trusts (SGX: J85)
CDL Hospitality Trusts, or CDLHT, is a hospitality trust with a portfolio of 19 properties and one build-to-rent project.
Its AUM stood at S$3.1 billion as of 30 September 2023.
For 3Q 2023, CDLHT reported a 19.7% year-on-year jump in revenue to S$70.1 million.
NPI increased by 23.3% year on year to S$39 million.
The hospitality trust’s operating metrics also showed healthy improvements, raising the probability that CDLHT will declare a higher distribution when it reports its second-half 2023 results.
The average daily rate for 3Q 2023 jumped 21.4% year on year to S$274 with revenue per available room (RevPAR) climbing nearly 20% year on year to S$238.
The trust has a gearing level of 38.4% with a weighted average cost of debt of 4.2%.
CDLHT sees many catalysts on the horizon that can drive tourism higher in the coming quarters.
Changi Airport’s Terminal 2 has been expanded with an increased capacity to 28 million passengers while upcoming attractions such as the Mandai Nature Precinct should attract more visitors to Singapore.
CapitaLand India Trust (SGX: CY6U)
CapitaLand India Trust, or CLINT, is an India-focused REIT with 15 assets located in five top-tier cities with an AUM of S$2.7 billion.
The REIT’s portfolio comprises nine IT parks, four data centre developments, and two industrial and logistics facilities.
For 3Q 2023, total property income rose 14% year on year to S$61 million while NPI increased by 13% year on year to S$46.7 million.
The better performance was attributed to income contributions from two new assets within the portfolio.
CLINT maintained a gearing ratio of 37% with 71% of its debt on fixed rates.
Its cost of debt, however, stood fairly high at 6.2%.
Portfolio occupancy stood high at 92% and the REIT boasted a diversified tenant base of 300 tenants with the largest tenant taking up just 12% of portfolio base rent.
Far East Hospitality Trust (SGX: Q5T)
Far East Hospitality Trust, or FEHT, is a hospitality trust with a portfolio of nine Singapore hotels.
Its AUM stood at S$2.1 billion as of 31 December 2022.
For 3Q 2023, gross revenue surged 42.5% year on year to S$30.2 million with NPI climbing 42.4% year on year to S$28.1 million.
Income available for distribution soared 51% year on year to S$22.9 million.
For 9M 2023, FEHT reported a 36.7% year-on-year increase in distributable income to S$60.3 million.
The trust has one of the lowest gearing levels of all Singapore REITs at just 32.2% with an average cost of debt of 3.2%.
For the quarter, average occupancy improved by 10.6 percentage points to 86.7% while RevPAR climbed 43.6% year on year to S$150.
FEHT pointed to the recovery in tourist arrivals in Singapore as a catalyst for its revenue and NPI.
Upcoming tourist developments such as the rejuvenation of Sentosa and the expansion of the integrated resorts should also continue to attract more tourists to visit Singapore, thereby benefitting FEHT.
Not sure which REIT to put your money in? Use our 7-step REIT checklist to find one that fits into your retirement plan. Checklist is inside our latest FREE report “Singapore REITs Retirement Plan”. Click here to download it now.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
